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Commercial banks

French Banking Battle Enters Final Phase

Strategic Insights

— 1 min read

The five-month struggle for control of France's three major listed banks, BNP, Paribas, and Societe Generale (SG), is nearing its conclusion. Investors are being bombarded with propaganda and promises from both the hostile bid of BNP's Michel Pebereau and the amicable merger proposed by Andre Levy-Lang of Paribas and Daniel Bouton of SG. The battle has exposed the inadequacies of France's regulatory framework and the limits of state intervention in corporate governance.

Key Takeaways:

  • The French banking battle has been marked by unprecedented spending, with both sides conservatively estimated to have spent FFr170m ($28m) on presentations and advertising.
  • The French authorities have been criticized for their slow and cumbersome response to the takeover bid, which has led to a lack of clarity on the regulatory framework.
  • The battle has exposed the limits of the French state's ability to intervene effectively in corporate governance, with the Bank of France and the finance ministry being overruled by shareholders.
  • Foreign institutional investors hold significant stakes in all three banks, with some 40% of Paribas, 25% of SG, and 20% of BNP being held by non-French nationals.
  • The outcome of the battle is far from certain, with analysts predicting that neither of the original proposals is likely to succeed.
  • BNP's hostile bid has been undermined by the lack of a convincing industrial plan, while the amicable merger has been hampered by the failure of the three-way mediation attempt.

Statistics:

  • FFR170m ($28m) has been conservatively estimated to have been spent by both sides on presentations and advertising.
  • 400,000 individual investors and 7,500 institutions must decide what to do with their Paribas shares by August 17.
  • Regulators have indicated that they will not intervene unless one bank gains control of another, with any takeover being considered automatic if one bank gains more than 50% of another's voting rights.

Sources:

  • "French Banking Battle Enters Final Phase", Financial Times, August 9, 1999
  • "French Banks Embark on Mergers", Financial Times, July 1999
  • "French Regulators in Crisis as Shareholders Gain Upper Hand", Financial Times, August 1999

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